In the largest civil settlement with a single entity in U.S. history, Bank of America has agreed to pay a total of $16.6 billion to the federal government and a number of states in order to resolve claims against the company and its former and current subsidiaries for the selling of shoddy mortgage and related securities. The subsidiaries include Country Financial Corporation and Merrill Lynch.
Whistleblowers $170M Reward: Shareef Abdou, Robert Madsen, Edward O’Donnell
The whistleblower case against Bank of America, one of the world’s largest financial institutions, was brought by four parties: Shareef Abdou, an executive in the bank’s operations group; Robert Madsen, a former property appraiser at a Bank of America subsidiary; Edward O’Donnell, a former financial executive at Countrywide; and Mortgage Now, a small New Jersey mortgage lender headed up by James Marchese. For their efforts, they will receive a total of about $170 million, according to various media sources.
Brian Mahany, the lawyer who represented Abdou, said, “It’s great to finally see some justice in the mortgage mess that hurt all of us. But the real heroes are the whistleblowers who risked their jobs, careers and reputations to stand up against corruption and fraud.”
Bank of America False Claims Act Settlement Terms
The civil settlement resolves claims filed under the whistleblower provisions of the False Claims Act, which allows private citizens to file suit on behalf of the United States government and to share in the government’s financial recovery.
As part of the global resolution, Bank of America will pay $7 billion in relief to help hundreds of thousands of citizens harmed by the financial crisis brought on by the unlawful misconduct of Bank of America, Countrywide and Merrill Lynch.
That relief will take a variety of forms: principal reduction loan modifications resulting in numerous homeowners no longer being “underwater” on their mortgages and finally having substantial equity in their homes; new loans to creditworthy borrowers who are having a hard time securing loans; the financing of affordable rental housing; funds to help defray tax liability as a result of mortgage modification, forbearance, and forgiveness; and donations to assist communities in recovering from the financial crisis.
An independent monitor will be appointed to make certain that Bank of America is meeting all its obligations under the settlement agreement.
Bank of America Admits Billions in Toxic Loan Sales
The settlement includes a statement in which Bank of America acknowledges that it sold billions of dollars of Residential Mortgage-Backed Securities (RMBS) without disclosing key facts pertaining to the quality of the securitized loans. When the RMBS fell apart, investors, including federally insured financial institutions, suffered billions of dollars in losses.
Bank of America also admitted that it originated risky mortgage loans and made misrepresentations about their quality to Fannie Mae, Freddie Mac, and the Federal Housing Administration.
The settlement does not absolve Bank of America, its current and former subsidiaries and affiliates, and any individuals from potential criminal prosecution, nor does it release any individuals from civil charges.
Historic Resolution Say AG Eric Holder and Whistleblower Lawyer Brian Mahany
“This historic resolution -- the largest such settlement on record -- goes far beyond the ‘cost of doing business,’” said Attorney General Eric Holder with lead whistleblower counsel Brian Mahany echoing the sentiment, “Corporate America is on notice that severe penalties are possible for fraudulent conduct.”
Associate Attorney General Tony West elaborated: “The significance of this settlement lies not just in its size; this agreement is notable because it achieves real accountability for the American people and helps to rectify the harm caused by Bank of America’s conduct . . . .“